A current forum thread started by Larry Swedroe is basically all about bond funds even though it doesn't look like it. Please go read it and the link(s) therein: viewtopic.php?f=10&t=107531 What did you learn from reading the interview with Larry Swedroe?

We also need to add a couple more things, believe it or not:1. Tax Filing Status2. Your Federal & State Tax Rate3. A list of all fund available in your 401k and any available tickers for those funds.4. Expense ratios for all 401k fund including the ones you originally list above. (Employer-sponsored plan ERs are often different than we'd find at financial websites.5. Review the "Answering Potfolio Questions" link to see if there is anything else you can include.

All of the information is pretty important to offering the most appropriate suggestions.

Thank you!

Last edited by pingo on Wed Dec 26, 2012 12:49 pm, edited 1 time in total.

For this question, all the other information mentioned by pingo is needed in order to give you reliable help.

For your original question, your update is somewhat helpful. You could exchange some or all of the 500 Index in your 401k to the bond fund. Use the $40k in cash to buy stocks in your taxable account. This is because you generally want to avoid holding bonds long term in your taxable account.

If that is not enough in bonds, you could exchange some of the stocks in one of the Roth IRAs into a bond fund such as the Total Bond Market INdex.

The question arises, however, why you are putting money into a taxable account? Are you completely filling your 401k? Does your spouse have a 401k or something similar available? Are you filling both Roth IRAs? If you are not using all your available tax-advantaged space, you probably should not be investing for retirement in a taxable account at all.

Your other question is about buying bonds "now". You clearly need some type of fixed income investment. Your portfolio is almost entirely stocks - not a wise position for someone your age. This does not mean your fixed income investment has to be bonds. You could use CDs instead. Or if you use bonds, you could use shorter term bonds which will lose less value when/if interest rates rise. Or you could use money market. Or I Bonds. or whatever.

The point is this. Your portfolio needs something other than stocks. It is unfortunate that none of the fixed income vehicles are paying much, but that does not mean you don't need some.

One last thing....each Roth IRA has two entries for Total International. Is one supposed to be something else?

We also need to add a couple more things, believe it or not:1. Tax Filing Status2. Your Federal & State Tax Rate3. A list of all fund available in your 401k and any available tickers for those funds.4. Expense ratios for all 401k fund including the ones you originally list above. (Employer-sponsored plan ERs are often different than we'd find at financial websites.5. Review the "Answering Potfolio Questions" link to see if there is anything else you can include.

All of the information is pretty important to offering the most appropriate suggestions.

For this question, all the other information mentioned by pingo is needed in order to give you reliable help.

For your original question, your update is somewhat helpful. You could exchange some or all of the 500 Index in your 401k to the bond fund. Use the $40k in cash to buy stocks in your taxable account. This is because you generally want to avoid holding bonds long term in your taxable account.

If that is not enough in bonds, you could exchange some of the stocks in one of the Roth IRAs into a bond fund such as the Total Bond Market INdex.

The question arises, however, why you are putting money into a taxable account? Are you completely filling your 401k? Does your spouse have a 401k or something similar available? Are you filling both Roth IRAs? If you are not using all your available tax-advantaged space, you probably should not be investing for retirement in a taxable account at all.

Your other question is about buying bonds "now". You clearly need some type of fixed income investment. Your portfolio is almost entirely stocks - not a wise position for someone your age. This does not mean your fixed income investment has to be bonds. You could use CDs instead. Or if you use bonds, you could use shorter term bonds which will lose less value when/if interest rates rise. Or you could use money market. Or I Bonds. or whatever.

The point is this. Your portfolio needs something other than stocks. It is unfortunate that none of the fixed income vehicles are paying much, but that does not mean you don't need some.

One last thing....each Roth IRA has two entries for Total International. Is one supposed to be something else?

Thanks for the feedback, very helpful.

Yes, funds were not named correctly for the roth iras. I corrected them now.

Being worried about interest rate risk is perfectly fine. However, you need to keep in mind what the relative risk levels are for a typical bond fund versus all the funds you currently own (equities). A quick glance on Vanguard's site of the last 15 years of returns shows a worst-case return for Total Bond Market of -0.82%, which was the only year out of the 15 with negative total return. For Total Stock Market, -37%, -20%, and two -11% years pepper the list.

Going back a bit further with the help of Morningstar.com, we can look at the Barclays US AGG Bond Index, which TBM tracks less its expenses (Vanguard TBM did not exist at the time I'd like to highlight). During the late 70s/early 80s, interest rates were rising, sometimes very rapidly. The index was pretty flat nominally through this period, until 1982 at which point it resumed its rise. From a real (inflation-adjusted) standpoint, performance was poor. However, this is a far cry from the potential loss in the stock market. Past is not necessarily prelude, but it gives you a good picture of what *might* happen.

If you need bonds, and you probably should have some, just buy them and don't worry too much about timing the bond market. If you are seriously worried about interest rates rising, you could opt for short-term bond funds. Just understand that you are likely forgoing some long-term performance in doing so. A 70/30 allocation at age 35 is perfectly reasonable...you could go for slightly more or less bonds if you so choose. Bonds provide the ballast, risk reduction, and capital for rebalancing that is currently missing from your investment portfolio.

Most have front load as well. I've picked the Blackrock S&P 500 since due to the low expense ratio and no front load.

If you have not done this already, you need to check on the front loads. Loads are usually waived within a 401k plan. This makes the Blackrock Total Return Fund much more attractive (although still a bit of a pig at .87%)

Assuming that the bond fund does not carry a load, this is a suggestion of how to rearrange what you already have and invest in the future.

This idea is roughly 69% stocks, 31% bonds, with 44% of stocks (31.6% of portfolio) in international. It is low cost and tax-efficient. If you are worried about rising interest rates, you could use a short term bond fund instead of the total bond index, but the short term bond fund will pay you less.

An alternative is to set things up differently. If you can find good CDs, use your cash to buy the CDs and adjust for more bonds in the 401k. It is unknown if CDs will work out better than bonds. Might. Might not.

I've got an interruption and will have to come back to how to make your contributions to maintain something like this.